Despite improvements to the credit report dispute system, consumers are still having a hard time getting credit report errors fixed.
Last week, the Consumer Financial Protection Bureau released a fresh report detailing the most common complaints it receives about credit reporting.
Most of the complaints received — 73 percent — were about the mistakes consumers found on their reports. For example, “one consumer, a recent college graduate, checked his credit report for the first time, only to find a number of derogatory accounts,” wrote the CFPB in its Feb. 27 snapshot. “He was able to remove all but one account from his credit report — a mortgage — that was supposedly originated at a time when the consumer was in high school.”
A significant percentage of consumers — 11 percent — also griped about the credit bureaus’ notoriously perfunctory investigation process, which the CFPB says is still making it tough for consumers to correct legitimate mistakes.
The recent college graduate with the phantom mortgage, for example, disputed the incorrect listing multiple times, to no avail, said the CFPB. After the third attempt, the credit bureau told him that it was no longer going to process his disputes.
“Consumers sometimes question the depth and validity of the investigations performed, given how quickly credit reporting companies sometimes return findings,” wrote the bureau. “Additionally, consumers report frustration when they have submitted documentation that should call into question the accuracy of the information provided by the data furnisher.”
The credit bureaus aren’t always the ones with the misinformation, however.
According to the CFPB, some consumers who complained about mistakes on their reports were confused about what is and isn’t a legitimate listing.
For example, some consumers complained about liens that stayed on their reports for longer than seven years. However, they didn’t realize that if they paid off the lien after it appeared on a report, their payment could restart the clock. (Liens may appear on your credit report for up to seven years after the date you pay it off.)
Some consumers also didn’t realize that if they ignored a lien completely and refused to pay it, the lien might never drop off their report. “Consumers are not aware that if the lien has not been paid after seven years, it may be reported indefinitely,” said the CFPB.
In addition, some consumers were also confused about how long bankruptcy notations could stay around, said the CFPB. (A Chapter 13 bankruptcy should fall off your credit report seven years after the bankruptcy was filed. A Chapter 7 bankruptcy will take longer. Credit bureaus can continue to report it for up to 10 years after the filing date.)
CFPB director: The credit reporting system is getting better, but …
In prepared remarks about the complaints the bureau has received, CFPB Director Richard Cordray said the credit reporting system has significantly improved in just the past year.
He cited that credit reporting agencies must now forward all supporting documents the bureaus receive to data furnishers (data furnishers are the companies, such as banks or credit card issuers, reporting the information to the bureaus). So consumers who have documentation to prove an error is real should have a much easier time getting the mistake resolved.
For the first time ever, consumers can also upload documents online, said Cordray, which should also make it more convenient for consumers to dispute the errors they find. Previously, consumers had to snail mail supporting documents to the bureaus.
But there’s still more work to be done, he said. In particular, Cordray urged credit card companies to give out free credit scores and educational information to cardholders so that consumers have a better idea of where they stand.
He also pointed out problems with the investigation process outside the credit bureaus’ walls and urged lenders and other data furnishers to fix them.
For example, Cordray said, some data furnishers aren’t properly investigating consumer disputes and are instead responding to the disputes by deleting the accounts in question rather than thoroughly investigating them.
“This practice can be detrimental because it deprives consumers of an important protection,” he said. “Not only do investigations determine the accuracy of a particular consumer’s dispute, but they also help furnishers uncover and correct broader problems within the systems they use to provide information to the credit reporting companies. When a furnisher learns more about these types of problems, it benefits not only the consumer who submitted the dispute, but also all other similarly situated consumers who did not.”
The same day that the CFPB released its snapshot of credit reporting complaints, it also issued a stern warning in the form of a supervisory bulletin to lenders and other data furnishers: clean up your act and start properly investigating errors — or else.